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ERM prepares CDP's first water disclosure report revealing water constraints are now a boardroom issue for global corporations

12 November 2010

CDP Water Disclosure, a new program from the Carbon Disclosure Project, today launched its first report on the impact of water constraints on the world’s largest corporations, clearly illustrating the significance and immediacy of water as a corporate issue.

The report, prepared by Environmental Resource Management (ERM), analyzes the public responses (1) to the first annual questionnaire sent out by CDP Water Disclosure to 302 of the world’s largest companies. The questionnaire asked for information on their water use and other water-related business issues and received a 50% response rate with 122 of these responding publicly and a further 25 companies (2) responding on a purely voluntary basis.

The information was requested on behalf of 137 institutional investors representing US$16 trillion in assets to increase transparency and accountability on water scarcity and other water related issues, and to inform the global market place on investment risks and commercial opportunities. The data will provide valuable insight into the strategies deployed by many of the largest companies in the world in relation to water use and will be used to help drive sustainability.

The report findings show that water is already impacting business operations with 96% of responding companies able to identify whether or not they are exposed to water risk and more than half of those reporting risks classifying them as current or near-term (1-5 years). 39% of companies are already experiencing detrimental impacts relating to water including disruption to operations from drought or flooding, declining water quality necessitating costly on-site pre-treatment, and increases in water prices, as well as fines and litigation relating to pollution incidents.

Water security is already high on the corporate agenda with 67% reporting responsibility for water- related issues at the board or executive committee level. The majority of companies (89%) have already developed specific water policies, strategies and plans, and 60% have set water-related performance targets.

Other CDP Water Disclosure report key findings:

  • Business engagement on water issues differs widely across different industry sectors: 100% of companies in the chemicals sector responded compared with just 29% in the oil & gas, and construction, infrastructure & real estate sectors.
  • Responses were received from companies in a total of 25 countries, with the most responses coming from the USA (59, 57% responding), the UK (14, 64% responding) and • Japan (13, 45% responding). The highest response rates were from South Africa (100%), Germany (83%) and Switzerland (71%).
  • A high number of corporations (62%) are identifying a wide range of water related business opportunities in areas such as water management, water efficiency and reduction, and wastewater treatment.
  • Just 53% of companies are able to identify whether they are exposed to water risks in their supply chains, as opposed to the high levels of awareness (96%) of water risks in their own operations.
  • Sectors reporting the greatest exposure to water risks include food, beverage & tobacco and metals & mining, with chemicals and technology & communications the least exposed. Physical risks to direct operations from drought and flooding were most frequently cited, but companies also recognize risks from changing regulations and reputational damage.
  • Companies exhibiting best practice in water management include Anglo American, Colgate-Palmolive, Ford, GE, PG&E and Taiwan Semiconductor Manufacturing.

The launch of CDP Water Disclosure’s first report along with the availability of individual company responses at www.cdproject.net gives investors, companies, governments and other interested stakeholders a wealth of information on companies’ water usage, the water-related risks and opportunities in their operations and supply chains, and their water management plans and performance targets.

Welcoming the launch of the first report, Jacqueline McGlade at the European Environment Agency, said: “Climate change is altering global water availability, meaning greater scarcity in some regions and more flooding in others. Such changes demand that we adapt our infrastructure and our consumption. It is encouraging to see in the Water Disclosure Report that many corporations have already started taking concrete measures. But we must facilitate this process by developing appropriate standards and tools to measure corporate water use and impacts across the whole supply chain.”

Paul Dickinson, executive chairman at the Carbon Disclosure Project said: “This data provides valuable insight into the strategies deployed by many of the largest companies in the world in relation to water and is a first step in helping drive investment towards sustainable water use. The changing availability of water resource is presenting opportunities to business through demand for new infrastructure, products and services and now is the time to seize these opportunities, address water challenges and build resilience – not once the well has run dry.”

Gregory Wade, global chief supply chain officer for global brewer Molson Coors, a lead sponsor of CDP Water Disclosure, said: “Transparency must serve as the cornerstone for stimulating integrated watershed resource management and CDP Water Disclosure is perfectly positioned to normalize best practice and mediate between investors and companies in valuing risks and opportunities. As we move forward, companies must accept the responsibility for their own transparency and join in this effort to help advance what will hopefully emerge as a common water reporting standard benefitting all stakeholders.”

Anne Kvam, global head of ownership strategies, Norges Bank Investment Management (NBIM), another lead sponsor of the program, said: “As a diversified investor with a long-term outlook and investments in a range of sectors at risk from increasingly scarce water resources, we take water management seriously. Companies that fail to consider the impact of water scarcity and other water-related risks pose a financial risk to investments.”

Velislava Ivanova, ERM’s Water Sustainability Practice Lead, said: “ERM’s involvement in preparing this report has been incredible. Our Water Sustainability Practice was established in response to the increasing focus on freshwater scarcity and quality concerns exhibited by our clients globally. With more than 50 professionals globally it brings together the specific expertise of ERM’s water and wastewater engineering practitioners, our resource efficiency experience, as well as our wider sustainability and climate change capabilities into a coherent, integrated water management offering. Key members, of which had the privilege to co-write the inaugural CDP Water Report and contribute to increasing stakeholder awareness around critical water issue for business globally.”

Demand for water has risen and is now projected to outstrip supply by up to 40% by 2030 (3), and approximately 80% of the world’s population already live in areas where fresh water supply is not secure (4).

As the climate changes, assuring global water security for both humans and ecosystems will increasingly present opportunities to business through demand for new infrastructure, products and services. It will also bring risks including physical disruptions to operations and supply chains, changing regulatory regimes and reputational damage from misuse, or perceived misuse, of what is a shared resource.

The full report can be downloaded at www.cdproject.net.

Ends

 

About CDP Water Disclosure

CDP Water Disclosure is part of CDP, an independent not-for-profit organisation holding the largest database of primary corporate climate change information in the world. CDP Water Disclosure provides critical data in relation to water from the world’s largest corporations to inform the global market place on investment risk and commercial opportunity. This data will provide valuable insight into the strategies deployed by many of the largest companies in the world in relation to water and will be used to help drive investment towards sustainable water use. The report provides comprehensive detail on water-intensive companies within the Global 500 such as those within the Chemical, Construction, Food, Beverage and Tobacco, Manufacturing and Industrial, Mining and Metals, Oil and Gas, Pharmaceutical, and Utility industries. To find out more please visit www.cdproject.net/water-disclosure

Background

Changes in climate and water scarcity are becoming a significant issue for businesses, bringing risks from physical disruptions to operations and supply chains, changing regulatory regimes and reputational damage from misuse, or perceived misuse, of what is a shared resource. However, they also increasingly present opportunities through demand for new infrastructure, products and services.

Water sits at the intersection of health, food and energy security, and has a direct impact on the survival of communities and business. If input costs in manufacturing grow too high, for example, an entire process can become uneconomic.

The long term impact of water management is likely to become not only an operational issue, but a governance issue, as has happened with carbon management. Investment funds, from pension and insurance to sovereign funds, are beginning to assess the long term implications of water management on corporate value. The $490bn Norwegian Government Pension Fund for example, is already evaluating water risk in 1,100 companies in which it invests.

Water measurement

One of the biggest challenges posed by water stewardship lies in accurate measurement and interpretation of a company's water footprint. Transparency on water usage is integral to effective risk management, and with this in mind, CDP Water Disclosure aims to accelerate standardised water measurement and reporting.

As companies have repeatedly demonstrated with carbon, what they measure they manage, and thinking about challenges in a strategic way will enable them to mitigate risks and identify opportunities, putting themselves in a far stronger position to navigate a water-constrained world than would otherwise be the case.

Water issues

Water availability is a significant issue and is affected not only by climate change but also by increased competition where local population and industrial development is on the increase. With the global population growing by around 88 million a year, demand for water is rapidly outstripping supply - in the last 50 years water use has tripled. Increasing population, industry, economic growth and urbanisation have all put additional stress on the provision of clean water. In the developing world, increasing water scarcity is driving population dispersal and there are concerns that this will lead to conflict and precipitate increased migration, hunger and disease. According to the UNFCCC, by 2025 more than half the nations in the world are expected to face freshwater stress or shortages, and by 2050, as much as 75% of the world's population could face freshwater scarcity (5).

For more information contact:

CDP: Lisa Lee
T: +44 (0) 20 7415 7196 / +44 (0) 7554 430 962
E:  lisa.lee@cdproject.net

Ogilvy Public Relations Worldwide:
Celestine Cheong: +44 (0) 20 7309 1020 / +44 (0) 7795 306 777
Kate Woodruff: +44 (0) 20 7309 3162 / +44 (0) 7763 908 420
E: CDPWater@ogilvy.com

ERM: Tom Ferguson
T: +44 (0) 20 3206 5209/ +44 (0) 77515 132 474
E:  tom.ferguson@erm.com

Notes:

  1. In its first year CDP Water Disclosure has analyzed just the public responses to the program which are 122 out of the 150 that responded. This may change in subsequent years.
  2. The statistics only include the responses from the 302 targeted companies in order to ensure that the subs equent reports compare a similar dataset. Best practice and other elements of the report also draw on the 25 purely voluntary responses received from companies outside the target 302.
  3. http://www.mckinsey.com/App_Media/Reports/Water/Charting_Our_Water_Future_Full_Report_001.pdf
  4. http://www.nature.com/nature/journal/v467/n7315/full/nature09440.html
  5. http://www.nature.com/nature/journal/v452/n7185/full/452285a.html

 

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